Celebrating 20 Years

Online Trading Academy has its roots in the largest trading floor in the Western US, founded in 1997 by Eyal Shahar. Independent traders needed training to be successful in their investments, and soon a teaching model was born. By 2001 trading had transitioned to the web and we became 100% devoted to education. From a single location in Irvine, CA, today we’ve grown to 40 worldwide campuses and a worldwide online presence, and over 250,000 people have experienced OTA workshops and benefited from our mission: Enriching lives worldwide through exceptional financial education.

Key Questions From You

I have been writing articles for many years and over that time, many of you have sent questions. While your questions have provided great ideas for articles and I do my best to answer them for you, I thought I would share some recent key questions that may help you achieve your financial goals.

Hi Sam,

I have heard you many times saying that you recommend people to first get good at trading the Q´s prior to extending to other assets. Saying that, do you mean specifically the ETF or the futures or does it not really matter? Is there a specific reason that you recommend the Q’s vs. SPY/ES? The latter just seems to me as being less volatile and hence easier to trade. Could you please elaborate?

Sam Reply: Sure, be happy to. In my opinion, the QQQ (ETF) is perfect for the new trader as it offers you the ability to keep the risk so low while you are developing your skills. If you start with the S&P Futures for example, the smallest loss you can possibly have is $12.50, that’s 1 tick on 1 contract. That is also unrealistic as you’re not going to risk 1 tick on a trade. If you even risk one full point on the S&P which is also unrealistic, you’re talking about a potential $50.00 loss. Why do that when you can trade as low as 10 shares of the QQQ. In our classes, we have students trading real accounts with real money in live markets, trading the QQQ for the reasons above. In my opinion, get very consistent with your supply/demand analysis and execution on the QQQ first. Trade 100 shares if you want, it’s still much lower risk than the futures. Having said that, there is no bigger fan of futures than I but don’t start with them. This will likely give you the best chance at success and that’s what this is all about.

Hey Sam,

Could you please add a general session for ‘Handling algorithmic trading on the other side?’ I see a lot of traps laid in the demand and supply zones to give a feel that the trade is going the other way. Many times the automated program on the other side does hit your stop loss and then turn. For countering algorithmic trading, I see the stop loss zone has to be increased, which reduces the trade. Since you already have the experience on the trading floor, I believe you would also have this expertise. I will really appreciate if you teach a general session on this topic. Similarly for trading options, if I try to shave the price, I see another automated program readily punching a plus .05 order to defeat my shaving.

Sam Reply: I would suggest that the issue is not auto-algorithmic trading but instead, where you are entering and placing your stop. Like an institution/market maker, we want to buy sell stops and sell buy stops in demand and supply levels. For example, many retail traders look at pivot lows and highs as conventional support and resistance levels. I would strongly suggest this is a flawed strategy and is very different than the demand and supply levels we teach at Online Trading Academy. The books teach everyone to enter at the prior pivot low or high with a sell stop or buy stop just beyond the pivot high or low. This is the most frequent time retail traders get stopped out, only to see price do exactly what they thought it would do. This is why we look for fresh demand levels just below pivot lows and fresh supply levels just above pivot highs. This allows us to buy retail sell stops and sell retail buy stops like an institution. Hope this helps.

Mr. Seiden:

Do you have a Book on the Supply-Demand Technique that you Teach.

Sam Reply: I don’t but I am almost done with one. I am looking to release it in 2014. To be honest, I have stayed away from writing books for the past 15 years simply because I was afraid I would give away my edge. However, over my many years in this industry, I have learned that even if you give away the complete strategy and even though the strategy is simple, not everyone will be able to execute it properly. You see, everyone from a young age is taught to buy high and sell low in the financial markets. Suggesting people buy when price is down and sell when prices are high in markets is very hard for many people. It’s fascinating but very true from my experience. So, I have been writing a book that both talks about strategy and at the same time, tells a story. Really hope people like it.

Hi Sam,

Firstly, thank you very much for the effort and the idea, I knew that there must have been something that makes sense on markets in the world and you put it together. I have been through the past three years of recordings of your lessons and finally it all makes sense. I am sending you a trade that I took today and have one question.

I have a hard time finding High TF levels on Weekly or daily charts, because I am not sure of one thing in fresh level definition. If a fresh level is the level that did not have a pullback to it and also is not a pullback to any level further on the left side of the chart, that means a fresh level is only the one, that has one full long candle behind it or continuous set of candles behind it. That means, the price-line has not been touched yet if we don’t cut through candles, which we don`t. And there are not many like that on High TFs. So I am never sure whether I am on the right side of the curve or not. Besides that everything is very good.

Sam Reply: Very well done on this trade and thanks for sending the chart, it really helps me see what you are referencing. Your level is considered “fresh.” It’s Odds Enhancer score is a “9” which is very good as the top score you can have is a “10.” The pivot high above your level would not be considered “fresh” as that is a rally into a level to the left already. The farther out you are on the curve, the more fresh levels you will find as there is more competition to buy and sell at the extremes. Also, notice at the level you shorted at, there was another level just below it. That is an Odds Enhancer that helped your trade be successful. The reason is because when price reached the upper level where your proximal line was placed, it had to get through the lower supply which means it took more buy orders (demand) than normal when reaching supply. This meant that your level was reached with few buyers left. Just like musical chairs, you got one when the music stopped, well done.

Your questions and comments are always welcome and helpful. While the rules and logic to proper trading are not that difficult, the act of proper trading and investing is not easy for the average person. The goal of these articles is to help you achieve your financial goals both large and small. Always remember how you make money buying and selling anything in life is EXACTLY how you make money trading the financial markets.

Disclaimer

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results.
Reprints allowed for private reading only, for all else, please obtain permission.